James Freestun - video transcript
The following transcript is from a speech by James Freestun, Managing Director, Solutions Group of Companies, at Brisbane City Council's Lord Mayor's Business Forum on 6 November 2014 at Carseldine.
I was asked to come up with a subject for tonight and with the very short period of time I was just going to go through - yeah, see how we go - three golden keys to doubling your turnover and tripling your profit. I know it's a pretty big claim. But what was really interesting - and if you listen to Hamish that's exactly what these guys said. I'm sure your profit went very well but they doubled their turnover.
I can tell you, this is something that's possible. I want to talk to you about the things I believe are the drivers that you need to make the difference in your business.
So the goals of the session - because I want to make you think. I want you to listen to what I have to say and think about what it means to you. The interesting thing is that there's a lot of stuff that I'll talk about today that you actually all probably already know, and have forgotten to keep on doing. We get into these patterns in business where we do things really well and then for some reason we get distracted. We read a book and go to a presentation or we try on something else. The important thing is that when that happens to remember to go back to look historically at what has done well for you and to go back to that and keep on doing it.
To give you some good tips, I want to give you some meat and potatoes, I want to make sure that this is something you actually take away and use instead of just a bunch of theory; and give you the three keys. I've also got three challenges for you tonight that I ask you to think about, and also have a bit of fun as well.
Okay, the first message that I want to have here, the first key, is that you matter. Some people forget about this in a business. I don’t know if you guys have ever read a book called The Entrepreneurial Myth. Anybody seen that? Michael Gerber did it. Thanks [Cath] well done, yes.
A great book. This guy has a theory that when you run a business it's about the metrics, and if you put systems and metrics in your business the idea is that you can sit on a beach somewhere in the world and you just get an email or a texter every day and check out the numbers and go, yep, everything's beautiful; and it's a pipedream.
I can tell you a lot of great information in terms of systems and the metrics that you can put into your business; very, very powerful stuff and I commend that to you. But the thing is that you make a difference. Leaders make a difference in the business. They create the culture; they create the theme for their business. What's really interesting - we had some discussions and a question before about the Millennials or about your Y Gens. The difference with those guys is that they are not loyal to the business; they're loyal to the leader. They're loyal to the people within the business.
It's interesting. People get frustrated because they go geez their job is about fifth on their list of priorities. So these people are loyal to people, and that's why you need leadership in a business today. If you want to engage Millennials, if you engage those Y Gens, you must be a leader, you must be there.
So one of the great messages that I want - is that great leaders are like you and me. I've got some examples. I'm a car nut. When I say that a leader makes a difference, you think of something like the V8 motor that Henry Ford insisted they built. They designed it, they put it down and he wanted it to be cast in one block, he wanted it to be cheap to make and reliable and the only way that he believed that could be done was to cast in one block and the engineers told him that it was going to be impossible. Of course, that happened. That's an example of that.
We saw Richard Branson in one of the pictures before. Richard Branson's an incredible guy. Do you think that he makes a difference to his business? Do you think they'd have a business without Richard Branson? They'd probably still do but my God the thing I really love about that guy is he had all these hobbies and things that he does, and he sponsors it with his own business and so sort of pays for his hobbies. Try doing that with the ATO and see what happens, I know.
So great leaders, and I want to talk about - ladies, I don’t know if you've heard of Anne Mulcahey. If you haven't, you should check her out. She's a total inspiration. She's the CEO of Xerox. She was CEO of the Year a couple of years ago and she went into that company, she closed down a whole desktop position - sorry, all the positions there I think were moved elsewhere. But she closed that whole division of business, has turned it around. It’s got a market cap of $16.5 million, and I can tell you when she took over it was a total basket case.
Jeff Bezos from Amazon. I mean , what a guy. We ask ourselves about whether it's possible to double that turnover and triple our profits, these people have changed the way that we do business. You go to Amazon and there were all these booksellers and then he said, right, I'm going to create these big warehouse with a huge variety and people come to it. He had these massive warehouses. He said, hang on a minute, why don’t we just print books as people order them. That's what they do. If you order a book now on most of these online things they actually print on demand.
Then hang on a minute, what about if we just delivered it to people digitally and create this thing called a Kindle. Then what they did is they said, okay, we're going to look at your buying patterns and if your buying patterns are similar to someone else, or you have your own buying patterns [unclear], what we're going to do is we're going to create a metric that will recommend the books that we know you're going to like.
What they've done when they do that is that their sales with those people that they sent out to increased by 35 per cent. Isn't that incredible? It's one idea. So there are some amazing people out there - and it's those individuals that make a difference.
The second thing I'd add to you is apart from great leaders you have to have quality. You've got to believe that it's possible for you. You've got to believe that if you're going to double your turnover and triple your profits you have to believe that's possible.
If you just think about your current business. If I say to you, okay, in the next 12 months double your turnover and triple your profits, what do you think? What's the first thing that comes up in your mind? I can tell you in 2013 we were very fortunate. One of my businesses is in the compliance phase, we had some legislation come through and it was [unclear], a few things, all the stars lined up. We did some pretty good marketing, I think. I've got a great team doing that.
You know what, we doubled our turnover. I can tell you our profit in that business increased by 428 per cent. So I think I've actually under-promised. If you've got fixed costs, if you double your turnover, your profit just goes through the roof, it's just incredible. That's provided you don’t fly your team to Sydney everywhere.
My first challenge for you tonight, when you think about the goals in this - and we talked about doubling and so on - I want you to see how this feels, and this is about belief, remember. This is about you saying is this possible for me? How far can I take my business, and that is and that is to you - you know a zero. It's such an insignificant thing. Just think about that zero and add it to whatever the main financial goal you have about your business, whether it's turnover or number of jobs, just add zero to the end and just see how it feels. Just try that out and try believing that it's possible. That's my first challenge for you tonight.
It's amazing, I was challenged by someone, a mentor, to do this myself and it’s just amazing how comfortable you get with that idea and how big it makes your thinking, and how you go, well okay, if that was possible what would I do to do it? So think about that. Think about adding a zero.
So believe it is possible for you, because I can tell you there are all kinds of examples of people that have done this. You mentioned Violent shoes before. I want them now, whatever, does anybody know what Zappos is? It's the biggest online retailer, shoe retailers, in the world. They turn over $600 million.
Okay, if someone said, oh well, let's sell shoes online but hang on a minute, people have to go to the shop and have to try the shoes on, don’t they? Does anybody know what they did? They send you three pairs and they have the courier return back. They have a 365 day return policy, where you can return at 365 days. You've got to pay for it but then if you're returning you get your money back. But they'll send you three pairs of shoes. You try them, pick the one that you like and the other two go back. Everyone else that looked at that business said this is impossible because you have to come to a shop to try them on.
You think about what Steve Jobs did when he came back to Apple with the iMac. The company was in a terrible position. They said, oh my God, let's get this guy in. I don't know if anybody's read his book. I haven't seen the movie but I've read the book and I can tell you he was an extremely difficult man but he had an extremely dedicated team, because they all wanted to work with the best in the world. They knew they were working with the best team in the world. It was about excellence, which is what appeals about your business and about what you guys do. That's what they were attracted to.
Do you know what he did? He changed the colours of the covers on the iMac. I'm sorry, I don’t know the numbers but it saved Apple at that time. It just went through and do you know what it was? It was mainly designed for people that design things and they like things to be cool, they like to have cool spaces. You've heard all the words there, it's all about being cool and groovy and how things look and about perfectionism and about the creatives and all that kind of stuff. They loved it. They thought these things are cool. I just want to have one of these sitting on my desk. I don't even care if it does what I want to do. So it's just an idea way.
So the first one is you are important, a leader and take the lead. The second one is to become financially savvy. This is something that most people in small business take their time in getting their heads into. Your financials are the key to so many of the opportunities of unlocking your business. You would be amazed.
I have friends of mine, do you know what they do? They go and look for businesses that are for sale and they just go in there and look at the cash flow issues and the stock and whatever. And they’ll find a business that is making no profit but have a look at that and go, there is so much potential because, because they run down the stock, order it in time, do this, do that. They just financially tune the business and turn it from something that's making nothing to something that's making a massive profit.
So how much time do you spend reviewing your financials? Is it an hour a month? Is it at the end of the year? You go and take everything to the accountant and go, right, produce something for this? How much time do you spend on your financials? I would suggest you do this, and some of the most valuable time that you can spend in your business is looking at your financials. Thoroughly review regular expenses.
I've got to tell you that in one of my businesses I had a situation where things were a bit tight and I'm someone who reacts early. I didn't like where things were going so we weren't losing on money or all that kind of stuff but I said if I want to maintain my profit in this business and let's go in there and have a look.
I went in there and do you know we sat down and in an hour and a half we found $400,000 in savings and over 12 months we've done $800,000 in savings. That's after an hour and a half meeting initially, and there was only retrenchment involved in that. It was someone that shouldn't have had their jobs six months prior to that. So it's just amazing when you review that.
One of the things I'll - my second challenge for you is to look at your costs and my second challenge is the add zero, and then what you do is have a look at your expenses and find 10 per cent of your expenses that you can cut. You'll be amazed what you'll find. The other thing I would ask you to do, if you have other people working for you, is who do you let spend your money?
I will tell you a story. In one of my companies I had - do you know what most people do? They look at the procurement of stationery and the other things, coffee and milk and whatever it is, and they go, yeah, I'll just give it to this junior person that's just started with the business. Most of them have no idea how to manage money. Most of them have credit cards that are run up to the max and they're using one credit card to pay another credit card, and you're letting them spend your money. Don't do it. You're mad.
I had one situation where - I'll just give an example - someone had started and someone had decided I'll take responsibility. That person that ended up with that role, they must have agreed to it in a meeting or something like that. I remember this email went around one day, and you know one of those ones where you go, oh no. It said, oh, would anybody like - I'm just making the order- a footrest or a fan to put on their desk, despite the fact we've got an air-conditioned office and all that kind of stuff. I didn't think much of, I deleted it.
When I was going through the - I just thought, I'm looking at the stationary and I'm going, geez, why has our stationery cost gone up by $5000 this month? I went in and had a look and the majority of that cost were all the fans and footrests that we bought. I can tell you that we moved offices about 18 months ago and we threw away 30 footrests and 20 fans. It's just incredible. I don’t know what happened to all of the rest of them. It's just amazing. So look at your expenses.
Sometimes it's not about running around, it's always about seeking new business, it's all about trying to make your business a better business, yes. But at the end of the day your financials can reveal a lot of stuff to you.
I ask you to also do this: create A and B accounts. I've got a lot of friends who complain that they don't make a lot of money out of their businesses. You look at their lifestyle and say, well dude, you've got a nice car and you're sponsoring your race car and you're doing this and you're doing that, whatever. Take all of those costs that - isn't this a beautiful thing about owning your own business, is you can take some of those expenses and charge them before you pay tax, and have a look at them and create some A and B accounts when you're doing that have [add backs].
Actually take those things that you would normally - let's say if this was owned by a publicly listed company, it doesn't matter how small you are, but it's a public listed company and you couldn't [pay] any personal expenses into the business. Whether it’s your personal mobile phone or your phone at home or whatever it is that you put into it, and actually separate those expenses out and then have a look at the real numbers. You might be surprised how much money you're actually making and how good your freaking lifestyle is as a result of it. But don't just think that you're not making money as a result.
The other thing on the financial side - I'm trying to make financials exciting and all that stuff - and that’s create key metrics for your reporting. With financials, you should splice and dice things every way that you can: by the transaction, by the transaction value, by the number of employees, by percentage of your wage costs, against the turnover that you're making. By your profits compared the amount of assets that are involved in your business; how much money have you actually got involved there.
I don’t know what kind of business you have but whatever it is, splice it and dice it by every one that you have and build up over a period of time a history of how things work in your business. Then what you do is you find the best month you've ever had or best quarter in that area, and every time you look at it you compare it back to that and go, okay, what's changed? Why is this different? Why is our business not operating in the best form that it ever did? It's an amazing benchmark for your business financially. So spend some time on financials.
The other thing is to focus on cash flow. Has anybody ever got a financial report from their accountant and gone, well, it said I made a profit but I just checked the bank account and it didn’t go up. What is going on here? That is because too many people focus on the profit of their business and if you're running accruals accounts it's very easy to show a profit and to not improve your cash position.
So spend time on this. I can tell you these are some of things that I have the toughest. I fired a couple of accountants because they couldn't explain accrual accounting to me, or areas of it. I just said I'm not going to use you any more because you can't explain this to me. I'm going to find someone else who can.
It's worth getting your head into and it's something that, as I said, it took me a while to get my head around it. But once I got my head around it, it made such a difference to my understanding of business and [growth]. So spend some time on your financials. It's very powerful.
Number three, our final one, do what counts. In business we can get really busy. We can have 2000 emails in our inbox or people coming and visiting us all the time or dealing with staff issues, or whatever it is. The question is what makes a difference to you. If you're trying to double your turnover and triple your profits, what is it that actually gets the results in your business? What are the activities and how much of your time are you actually spending on those activities? Because we can get really busy doing a bunch of stuff in our businesses that make no difference in the long run, or make little difference. This is about leverage.
Especially as the leader in the business, your job is to find out how you can get the maximum leverage out of you. That's what employing people's about.
I always find it amusing when I find people that employ people and complain about it. Look, people will let you down. Human beings are human beings and all of that kind of stuff. But at the end of the day, if you run a service business or any kind of business, people are your leverage. If you don't want to be someone who charges by the hour for your time - which you can do okay doing but it will always limit your income - if you want to be someone who has some leverage, then you have to employ people. You have to spend that time to do whatever you need to them and learn how to get them to leverage their time.
The first way to do that is to learn about it yourself, to do it for yourself. So what activity is a leverage activity for you? What gets the result? Is it talking to clients? Is it writing marketing material? Is it sending emails? Is it doing social media and connecting with people? What is it the main? Is it writing proposals and going out and sitting down with people and knocking on the door and saying we want your business, we're the best at what we do. We might not be the cheapest but we are here; have a look at this great work that we've done and this award we've just won - done. If that's what's going to make a difference that's what you need to be doing.
It's really interesting, I have a friend of mine who owns one of the cab companies here in Brisbane, a call centre. He's a fascinating guy to watch what he does. Neil, I know you know him Graham. He knows that what makes a difference is him out there talking to the people that have the accounts, that use his business. That's what he does. He's fascinating to watch. He understands this principle so well, and because of it they have one of the most amazing social networks in the city and one of the most influential people in the city great people too.
So you've probably heard of the Pareto Principle, the 80/20 rule, and that is that 20 per cent of what you do gets 80 per cent of your [results]. Find out what it is and do it. Look historically. We talked about this earlier.
Look back in your business and work out what it is that you did that got results. Think back. When did you make that jump? What was that month that you had that massive increase in turnover? What was it that you did? Who was that extra client and what was the character risk to that client and where you can find more of those guys?
Go out there and find them. Go out and spend some time and look for them and that will make the difference. This will double your turnover and more than triple your profits I hope. So who do you need to talk to? What brings the profit and how do you grow it?
My challenge three for you, so the third challenge is to spend the first hour of every day for the next month doing what counts. Don't go in there and answer emails. This is not a time management but I love talking about time management and managing yourself. One of the things you can do is set two bunches of times during the day for your emails and don't answer them all the time. It's the biggest time waster people do, is they answer an email every time it comes into your inbox.
Don't be one of those people that do that. Set an hour or so at the beginning of the day and do the stuff that matters, that's going to bring [unclear].
Okay, so the summary. Key one, you make a difference, believe in yourself. Leaders make a difference, individuals make a difference. When a big problem happens, a big leader shows up. That's the way that the world works.
Key one is add a zero - challenge one, I should say, is add a zero. Whatever it is, whatever is the main metric, goal, thing in your business that you focus on, add a zero to it. Get used to it. Get comfortable with that. Enjoy it, enjoy the challenge that would be associated with that and believe it's possible.
Be financially savvy. The second challenge is cut your expenses 10 per cent in the next 90 days. Spend some time on this and you will be amazed what you find.
Key three is do what counts and the third challenge is to spend the first 60 minutes of the next 30 days on every work day doing the stuff that makes a difference in your business. Thank you for your time.
Go back to the Growing your Business - Business Masterclass videos.